My thought was, hey i can play music to the 4 in ceiling, leaving me 3 channels to use for surround sound.
There is a zone 2 on the HK receiver, on the back it says 'assigned amp' i figured that would be used for the floorstanding speakers for the TV and the Front L/R and Surround L/R would be used for the 4 in ceilings... am i totally misunderstanding all this!?
Yes, I think there may be some misunderstanding.
Here is a speaker description with their traditional usage:
Front Left/Right: These are the 2 speakers traditionally used for stereo music. They are in the front of the room, and flank the TV.
Center: This is the speaker placed above or below your TV. It is where most, (~85% ?), of the sound in TV/Movies comes from, including almost all voice. People who have a L/R but no Center get a "phantom" center effect. When your AVR detects there is no Center, it sends all Center sounds to the L/R equally. The same sound coming from both your L/R at exactly the same time and volume is interpreted by your brain as coming from the middle... thus a "phantom" center.
Surround Left/Right: These are speakers usually placed beside or a little behind your main listening position. In TV/Movies, these speakers don't get a whole lot of use, but they get the sounds that are supposed to be coming from offscreen, like a car door opening, door creaking, footsteps, etc. A system with Left/Center/Right and Surround Left/Right is a 5.0 system, (5 separate channels).
Surround Rear Left/Right: These are behind your chair, and get the same type of effects as the Surround L/R. If you add these to a 5.0 system, you get a 7.0 system.
Subwoofers: These are the .1 in a 5.1 or 7.1 system, or if you have 2 of them, the .2 in 5.2 or 7.2.
You have 4 speakers in the ceiling. I don't know anybody that would suggest using them for anything but surrounds. I don't think you'll be happy using the front 2 ceiling speakers as your Front L/R. With that in mind, you need Front L/R and a Center. You will use your L/R for stereo music, and all of your speakers for TV/Movies. Your AVR will have a "multi channel stereo" mode, or something like that. It will send the Left half of a stereo signal to all your Left speakers, and ditto for the Rights. It will kinda tend to fill up the room with stereo music and may be useful for parties, but the likely lower quality of your ceiling speakers than your fronts will probably make it undesirable for personal music listening.
The "assigned amp" gives you some flexibility, but likely something you won't play with. Instead of a traditional 7.2 system, it is possible to have Front Wides, Front Highs, and maybe even you want to drive a couple speakers in another room or on the porch. Your HK has 7 channels, meaning it has 7 built-in amplifiers that can drive 7 speakers. You may chose to only use 5.1 in your main room, and drive 2 speakers on the porch, in which case you can "assign" those 2 channels to get L/R instead of Surround Rear L/R, or some other configuration.
Bottom line, I suggest you look at new L/C/R speakers, and 1 or 2 subwoofers. Use the ceilings speakers for surrounds.